In the Nordic buyout sector, the deal activity remained stable despite the covid-19 pandemic. Invested amount in the segment remains high at around €7.8 bn. The activity in the ICT sector was remarkable.
Among the buyout deals, the ICT sector by far attracted the most investments, 41 in total, making up 39 per cent of all transactions. The number is 50 per cent higher than the average in the years between 2015 and 2019. The increased attractiveness of tech companies in the buyout segment can be interpreted as a response to the pandemic and changing consumer patterns.
“Investors flocked to companies that were not too affected by the pandemic, and it makes sense that companies in the ICT sector profited; they were safe bets,” says Joachim Høegh-Krohn, CEO at Argentum.
Visma, a Norwegian provider of software that simplifies and digitises core business processes, stands out. Following HgCapital et al.’s investment in April, Visma was valued at €10.2 bn, making it the largest ever software buyout. Other large ICT buyouts include Triton’s public-to-private investment in HiQ, a Swedish IT company and management consultancy specialising in B2B tech services. Further on, EQT and TA Associates invested in IFS, a Sweden-based enterprise software provider, and valued the company at more than €3 billion.
“Scaleable software companies with ‘sticky’ and recurring revenues, like Visma and IFS, have been attractive during the pandemic. Many of these companies have matured and were ready to take the next step in the company’s lifecycle, from growth to buyout. Hence, the pandemic is not the only explanation, but it might have been an accelerator. Many sectors are going in the SaaS direction now,” says Høegh-Krohn.
Other industrial tech deals were Stockholm-based Iptor, a leader in supply chain management, and Oslo-based SuperOffice, a leading CRM platform for medium-sized European B2B’s. Also, Nordic Capital acquired the Danish website and digital marketing provider Siteimprove.
Consumer: Investments fell by more than 50 per cent compared to the average in the previous five years (15 deals in 2020). Equip Capital, a Norwegian investor in the growth equity space, is invested in many companies within consumer and B2B services. They made one new deal in 2020, in January, and focused on herding existing portfolio companies through the crisis. Managing Partner, Sverre Flåskjer, explains:
“When the pandemic hit, we were lucky to be operating with relatively low debt in our asset class, and a considerable liquidity buffer. This made us able to minimise costs, and together with public support schemes, our portfolio companies have not had unmanageable losses. None of them will end up having a negative EBITDA,” he says.
In Equip’s portfolio, we find consumer companies like Makeup Mekka and Rush Trampolinepark. They both faced challenges and opportunities due to the pandemic.
“Makeup Mekka, a web-based makeup retailer, increased its market share as more customers tried their platform for the first time. The company also expanded into Sweden. But in general, the makeup market shrunk due to people being mostly at home. Rush ended up boosting both profits and EBITDA, even though the trampoline parks were closed most of the year. The boost happened because they used the year to buy out competitors at a low price, combined with astonishing results when the parks were open during the summer,” Flåskjer says.
Industrials: Companies in the industrials sector attracted 27 investments in 2020, a decrease of 36 per cent compared to the last five years. Another notable transaction in the industrial sector was EQT’s investment in Molslinjen, Denmark’s most prominent domestic ferry operator. Beijer Reef og DESS. Among large transactions we find Opus, a Swedish group of companies that provide vehicle safety and emission testing technology, in which Searchlight Capital’s (US) made a public-to-private deal.
Health care and life sciences: Somewhat surprisingly, there were only eight buyout deals in the sector in 2020. The low number makes up a 26 per cent reduction compared to the average in the previous five years.
In the Nordic buyout segment in 2020, Swedish companies were the only ones that attracted more deals compared to the average between 2015-19. Swedish companies claimed 43 per cent of all buyout deals in the Nordics, compared to an average of 33 percent over the period 2015-19. Further on, Swedish companies accounted for 54 per cent of the invested amount in the buyout segment.
Danish companies attracted 22 per cent of all deals. This was a 6-percentage points reduction compared to their average Nordic market share in the previous five years. 20 per cent of invested capital, second-most, was attracted by Danish companies.
The number of buyout deals involving Norwegian companies were 22 per cent lower than the average the past five years. Norway accounted for 19 per cent of buyout deals in 2020, one percentage point lower than its average share over the period 2015-19. Norwegian companies accounted for 18 percent of invested amount, similar to the country’s share of investments.
In terms of number of investments, Finnish companies have experienced the largest decline with a reduction of 35 percent in 2020, compared to the average over the period 2015-19. Finnish companies attracted 15 per cent of buyout deals in 2020, 4 percentage point lower than its average share in 2015-19. The number of investments in Finnish companies is down 36 per cent compared to the previous five years.
On the list over the most active fund managers in 2020, we find traditional buyout players like EQT, Altor and Norvestor. We also find fund managers in the growth phase, between venture and buyout, like Verdane and Adelis (see list below).
“The way we see it, you can invest in a majority share of a company – like the buyout funds do – or take a large minority position. We do the latter, in companies that have the potential to grow 20+ per cent a year, where management and current owners are looking for competent capital to accelerate” says Henrik Lisæth, Partner at Explore Equity, a growth investor similar to Verdane and Adelis.
Lisæth argues that growth funds often can offer “the same experience and competence as buyout funds,” and allow, through the minority ownership stake, to leave most of the future joint value creation to the founders. Hence, rather than cashing out before the growth phase, the founder would settle for a more modest price level today.
“We believe the traditional auction processes, where the last dollar on the table wins, are not suitable to all. Future successful growth companies, we believe, are companies that find an investor that matches them, not necessarily the one that is willing to pay the most upfront. We enter companies in the middle of the flight and continue in a partnership with the founders, rather than buying the company out and go alone,” Lisæth says. Read about Explore’s portfolio company Face2Face.
# of deals
Caia Cosmetics, Cura of Sweden, Danelec Marine, Evondos, Stratsys
Beijer Ref, Chr. Hansen Natural Colors, IFS, Molslinjen,
AddPro, Currentum, Moment, SuperOffice
Axentia, Kanari, Valamis
DTK Group, Inspari, Junget
Altor Equity Partners
Eleda Group, Gunnebo Industrier, OX2
Pearl Group, PHM Group, SmartRetur
Litorina Capital Management
Klinikk For Alle, Sandbäckens, Sushi Yama
Swedish fund managers were involved in 33 percent of transactions. The second largest country, in terms of the home country of the investor, was the US. American fund managers were involved in 14 percent of all transactions, marginally higher than the three other Nordic countries.
33 per cent of buyout transactions were made by non-Nordic investors, which is the highest level on record. However, the number of deals by non-Nordic investors have been higher before, when the overall activity was higher. The underlying trend shows that international investors’ appetite for Nordic companies are increasing: Their share was almost 10 percentage points higher in 2020, compared to the average in the last five years.